Conversion Ratio

DEFINITION of 'Conversion Ratio'

The number of common shares received at the time of conversion for each convertible security. It is calculated by using this formula:

INVESTOPEDIA EXPLAINS 'Conversion Ratio'

The higher the ratio, the higher the number of common shares exchanged per convertible security. The conversion ratio is determined at the time the convertible security is issued and will have an impact on the relative price of the security.